Tax Lien Certificates: 3 Things You Need to Know Ahead of Time

When someone can no longer pay the taxes on their property, the state is able to come in and gain control of it in order to obtain the money that’s still owed on the property. This means they can put it up for sale or put a lien on it. So when investors hear of these types of properties, they know they could buy tax lien certificates and potentially get a quality home or property for a fraction of the price. Explore a few things you need to know when going about this process yourself.

Benefits

Usually, the common reason for wanting to obtain tax lien certificates is so that the buyer can purchase a property for a really affordable price or a low, fixed percentage rate. That’s because more times than not, buyers can get a good bargain. Investors like this know that when people are behind in taxes or cannot pay them, a lien will be placed on their house. And in the end, if the money is unpaid, the house can be put up for sale. If you are someone that has enough cash to really spend on these kinds of the properties, the benefits can be endless.

Negatives

While tax lien certificates seem like they would be ideal for just about anyone with money, there are some drawbacks. People that really succeed with properties like this are those that know the process, are willing to take risks and are prepared for the unknown. For example, understanding what a property is truly worth is essential. That’s because you may purchase a property under the impression that it is worth a certain amount of money. Yet, once it’s yours, it may not be worth the amount you thought. That’s because it takes time and knowledge to research property value information. It may look great, but the home could be in a flood zone or maybe it has structural damage, or other issues that can bring the value down. In the end, you will be stuck with it and you cannot get your money back when you buy properties with tax lien certificates.

Additional Info

Furthermore, it’s really important to know what you’re getting into when you decide to purchase property this way. Since you’re simply an investor, you should know that lenders do allow property owners to do what they can to remain in ownership of their property during a certain window of time. This means even though you may purchase tax lien certificates, there is still the possibility that a property owner could gather up enough money so that they can pay what’s owed on the house and keep the property. This isn’t likely, but possible, so you should be ready for the fact that even though you could get paid the interest owed on the property, you may not get the property. On the other hand, if the lender has given the owners sufficient time to get the money, yet they still cannot seem to pay, then they will go into foreclosure. If you own tax lien certificates, you now have the property to keep or sell if you want to.